Citigroup is facing further financial write-downs after revealing it has an exposure of $4bn (Â£2.03bn) to the troubled bond insurance sector and has been forced to move a $10bn hedge fund on to its balance sheet after significant losses.

The banking conglomerate also warned that further deterioration in the US housing market could lead to further write-downs in its sub-prime and leveraged loan books.

The warnings come after the bank suffered its worst quarter in its 196-year history, recording a loss of $9.83bn after accounting for $22.2bn in write-downs and other provisions.

Citigroup, which has already bolstered its balance sheet by $22bn in the last three months, may now have to raise further funds from external investors.

The bank's quarterly 10-K report, which was filed after the market closed in New York, reveals that on February 20, Citigroup entered into a $500m credit facility with its Falcon Multi-Strategy fixed income funds.

As a result of becoming its primary beneficiary, Citigroup was required to place the hedge funds assets on to its books, adding $10bn of assets and liabilities.

The news is likely to trigger a further sell-off in Citigroup's shares, which have slumped by 50pc in nine months, in spite of closing up seven cents at $25.12 last night.